17 April 2017 Financial Services Diversified Financial Services

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1 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Vol th Hotung Investment Holdings Target Price: Price: Buy SGD2.00 SGD1.75 Nothing Ventured, Nothing Gained Market Cap: USD122m Bloomberg Ticker: HIH SP We initiate coverage on Hotung with a BUY recommendation and a TP of SGD2.00 (14% upside). Hotung, a pioneer in Taiwan s venture capital industry, has an established track record of profitability. However, it has historically traded at low valuations, as the market probably has not known or understood its business model. A 100% payout policy has resulted in cumulative dividends of SGD70m paid over the past five years. The stock offers attractive forward yields of c.10%. We see good value at present levels, with the stock currently trading at 0.5x FY17F P/BV. Continued share buybacks or a partial capital reduction could serve as catalysts for the stock. Our TP is based on a FY17F P/BV of 0.6x. Taiwan s premier venture capitalist. Hotung Investment Holdings (Hotung) is one of the pioneers in Taiwan s venture capital industry. It has close to 30 years of experience investing in companies across a broad swathe of industries, from biotechnology to e-commence and smart home key components. Leveraging on its expertise on the ground as well as on its network, the group has built up a solid track record and stayed consistently profitable, except during 2008 when impairments spiked due to the global financial crisis. Almost a 100% dividend payout policy. Hotung typically invests in companies that are in an expansion stage of growth, and makes its exit through subsequent listings or trade sales of its portfolio companies. To date, it has successfully listed 200 companies on major bourses around the world. The group has a dividend policy of paying out most of its earnings. Its average payout ratio during the last five years was 97% and it paid out some SGD70m in cumulative dividends during this period. The stock has traded at a yield range of 8-11%, and we forecast a forward yield of 10% over FY17-18 as the group continues to maintain a regular pipeline of new investments and exits. Paying 30 cents on the dollar for the investment portfolio. Hotung has a liquid balance sheet, and it is currently sitting on a net cash position of TWD2.1bn (SGD96m). This represents c.60% of its market capitalisation. Backing out its net cash, the implied price an investor is paying for its underlying investments is 30 cents on the dollar. Also, with the stock trading at a steep discount to its book value, management has embarked on an active share buyback programme. It purchased back 23% of the outstanding shares in the last decade. These buybacks are highly accretive, and provide another avenue for the company to return capital to shareholders. Initiate coverage with BUY and a TP of SGD2.00. Following the global financial crisis in 2008, Hotung s P/BV has steadily re-rated to 0.5x from 0.3x, as it established a track record of profitability and generous payout levels. We see good value at current levels, with the stock trading at 0.5x P/BV and a FY17 yield of 10%. Continued share buybacks or a partial capital reduction to return surplus cash could serve as catalysts to re-rate the stock further. As a key risk, the company is susceptible to economic cycles in the Greater China region Share Data Avg Daily Turnover (SGD/USD) 0.12m/0.08m 52-wk Price low/high (SGD) Free Float (%) 73 Shares outstanding (m) 97.4 Estimated Return 14% Shareholders (%) Tai Lung Capital Inc 17.9 Mega Intl Commercial Bank Co Ltd 6.2 Daiwa Capital Markets Singapore 5.4 Share Performance (%) YTD 1m 3m 6m 12m Absolute Relative Source: Bloomberg Source: Bloomberg Hotung Investment Holdings (HIH SP) Price Close Relative to Straits Times Index (RHS) Forecasts and Valuations Dec-14 Dec-15 Dec-16 Dec-17F Dec-18F Total turnover (TWDm) Reported net profit (TWDm) Recurring net profit (TWDm) Recurring net profit growth (%) (20.7) 60.0 (24.2) Recurring EPS (TWD) DPS (TWD) Recurring P/E (x) P/B (x) P/CF (x) 1, na 8 7 Dividend Yield (%) EV/EBITDA (x) Return on average equity (%) Net debt to equity net cash net cash net cash net cash net cash Our vs consensus EPS (adjusted) Source: Company data, RHB Analyst Goh Han Peng goh.han.peng@rhbgroup.com Powered by the EFA Platform 1

2 Financial Exhibits Financial model updated on : Asia Singapore Financial Services Hotung Investment Holdings Bloomberg HIH SP Buy Valuation basis Historical P/BV trading range. Key drivers i. Portfolio exit; ii. Share repurchases; iii. Higher dividends. Key risks Market volatility risk. Company Profile Hotung Investment Holdings is one of the pioneers in the venture capital business, with over 30 years of experience in investing and fund management. The group operates primarily in Taiwan, China and the Silicon Valley and has listed 200 companies on major exchanges around the world. Financial summary Dec-14 Dec-15 Dec-16 Dec-17F Dec-18F Recurring EPS (TWD) EPS (TWD) DPS (TWD) BVPS (TWD) Weighted avg adjusted shares (m) Valuation metrics Dec-14 Dec-15 Dec-16 Dec-17F Dec-18F Recurring P/E (x) P/E (x) P/B (x) FCF Yield (%) (1.2) Dividend Yield (%) EV/EBITDA (x) EV/EBIT (x) Income statement (TWDm) Dec-14 Dec-15 Dec-16 Dec-17F Dec-18F Total turnover Gross profit EBITDA Depreciation and amortisation 0 (0) (0) 0 0 Operating profit Income from associates & JVs Pre-tax profit Taxation (8) (44) (71) (79) (85) Minority interests (0) (13) (44) (6) (5) Recurring net profit Cash flow (TWDm) Dec-14 Dec-15 Dec-16 Dec-17F Dec-18F Change in working capital (17) Cash flow from operations (43) Capex 0 (0) (1) 0 0 Cash flow from investing activities (391) (257) (120) Dividends paid (314) (258) (400) (301) (380) Cash flow from financing activities (355) (323) (484) (301) (380) Cash at beginning of period 1,774 1,058 1,767 2,079 2,000 Net change in cash (742) (72) 5 Ending balance cash 1,058 1,767 2,079 2,006 2,005 Balance sheet (TWDm) Dec-14 Dec-15 Dec-16 Dec-17F Dec-18F Total cash and equivalents 1,068 1,775 2,080 2,001 2,001 Tangible fixed assets Total investments 6,015 6,259 5,359 5,700 6,000 Total other assets Total assets 7,299 8,130 7,504 7,771 8,071 Other liabilities Total liabilities Shareholders' equity 7,139 7,731 7,184 7,471 7,766 Minority interests Total equity 7,139 7,827 7,298 7,591 7,891 Net debt (1,068) (1,775) (2,080) (2,001) (2,001) Total liabilities & equity 7,299 8,130 7,504 7,771 8,071 Key metrics Dec-14 Dec-15 Dec-16 Dec-17F Dec-18F Revenue growth (%) (25.3) 66.9 (17.8) Recurrent EPS growth (%) (20.1) 62.7 (23.5) Gross margin (%) Operating EBITDA margin (%) Net profit margin (%) Capex/sales (%) Source: Company data, RHB 2

3 Investment Merits A pioneer in Taiwan s venture capital industry. Hotung is one of the pioneers in Taiwan s venture capital business, with almost 30 years of investment and fund management experience under its belt. The group which operates primarily in Taiwan, China and the Silicon Valley has listed some 200 companies on major exchanges around the world. Led by an experienced management team, it invests in a broad range of industries that cover sectors from biotechnology, e-commerce, agriculture to smart home key components. The group also has an in-house fund management arm that manages third-party funds, as well as funds generated from its venture capital business. Figure 1: Total investments by industry 2016 Source: Company data To manage its investment risks, Hotung focuses on companies that are past the start-up phase and are in the expansion or mature stages of development. Typically, profits are made upon portfolio exits either through a trade sale or an IPO process. The group has built up a solid track record and has stayed consistently profitable in the past decade, except in 2008 when impairments spiked up due to the global financial crisis. Figure 2: Investments by geographical area in 2016 Figure 3: Investments by stage in 2016 Source: Company data Source: Company data 3

4 High yield play. The group s dividend policy is to distribute the majority of its earnings. In line with this, the average payout ratio during the last five years was 97%, with some SGD70m in dividends distributed during this period. The high payout ratio has translated into a high yield for the stock, which traded at a yield range of 8-11%. We forecast a forward yield of 10% over FY17-18, as the group continues to maintain a regular pipeline of exits and new investments. Figure 4: Hotung's dividends Source: RHB, Bloomberg It is cash-rich cash holdings represent 64% of market cap. Historically, Hotung has maintained strong liquidity, with a net cash position. In recent years, cash has piled up further, with the proceeds from portfolio exits. Out of its asset base of TWD7.4bn as of end-2016, cash and cash equivalents totalled TWD2.1bn (SGD96m) which represents 64% of its market capitalisation. Backing out its cash, the implied price an investor is paying for its underlying investments is 30 cents on the dollar. Figure 5: Cash/market cap (MC) of Hotung (%) Source: RHB, Bloomberg Value-accretive share repurchases. With the stock trading at a 50% discount to its book value, management has embarked on an active share buyback programme. It has bought back 23% of the outstanding shares in the last decade. These buybacks are highly accretive and provide another avenue for the company to return value to shareholders. 4

5 Figure 6: Recent share buybacks made by the company Source: RHB Valuation Following the global financial crisis in 2008, Hotung s P/BV has steadily re-rated to 0.5x from 0.3x, as it established a track record of profitability and generous dividend payouts. While venture capital investments are inherently hard to predict in terms of the timing of exits, we believe Hotung s broad portfolio of companies across multiple industries and its tilt towards later-stage investments has helped to smoothen its earnings volatility. Figure 7: Hotung s P/BV trend Source: RHB, Bloomberg Moreover, with the large cash pile at its disposal, Hotung has additional levers to return capital via value-accretive share repurchases or a partial capital reduction to return excess cash. We continue to see good value at the current levels, with the stock trading at 0.5x P/BV and offering a yield of 10%. As a comparative measure, Hotung s peers are trading at an average P/BV of 1.4x. Our TP of SGD2.00 is based on a 2017F P/BV of 0.6x. Figure 8: Peer comparison Note: Data as at 10 Apr 2017 Source: RHB, Bloomberg 5

6 Industry Overview Opportunities within Greater China China s 13 th Five-Year Plan (FYP). After years of depending on industrialisation to fuel economic growth, the Chinese Government has started to recalibrate its growth engine towards creation and consumption. In the 13 th FYP, China intends to lend support to sectors such as biopharmaceuticals, Internet, environmental services and the high-end public service sectors in order to boost public consumption as well as innovation in China. Hotung is well-positioned to ride the growth. Rapid urbanisation and a growing middle income have raised the impetus for investors to take interest in the consumer and healthcare sector. In recognising the shift in interest, Hotung began investing in these growth sectors in recent years. As at end-2016, the company has 14% and 12% of its investments within the booming e-commerce and retail channel industries respectively. Furthermore, it has a 10% exposure to the biotechnology industry. Moving forward, its management has expressed interest to further invest in cloud services, the sharing economy and biotech companies. Figure 9: Selected investee companies of Hotung Company Industry Description Consumer Technology, hardware and equipment Biotechnology Semi-conductors Nien Made designs and manufactures shares shutters and related components. With a vertically-integrated business model, the company prides itself on providing high-quality products at lower cost, with fast delivery. It is listed on the Taiwan Stock Exchange. Quantenna Communications Inc is the leading provider of high-performance Wi-Fi solutions aiming to provide the highest speed, broadest coverage, highest capacity and most reliable performance. Its products are deployed by major service providers including AT&T, DirectTV and other major telecom players. JHL Biotech is an emerging biopharmaceutical company with extensive biotech and manufacturing experience. It intends to provide affordable medicines to patients worldwide. It is listed on the Taiwan Emerging Stock Board. nfore Technology is a communications solutions provider that equips companies with high-quality Bluetooth module wireless protocol, system integration and DSP algorithm solutions. These companies include OEM manufacturers in the automotive and IT industries. Manufacturing CNano Technology Ltd is a world-leading manufacturer of multi-wall carbon nanotubes, which are used In the energy storage, structural and electronics industries. Internet Hongku Info manages ipeen.com, the leading crowd-source review platform in Taiwan. With over 90m monthly page views per month, ipeen helps businesses advertise to their audience. Internet Great Gentry Co manages the MamiBuy website, which is an online maternal care and childcare forum as well as an e-commerce platform. With over 500,000 members and 300 product suppliers, MamiBuy leads in traffic and user loyalty amongst its industry peers in Taiwan. Pharmaceutical Innopharmax is a specialty pharmaceutical company focused in the area of oncology, infectious diseases and MRI contrast agents. Source: Company data Greater China s start-up society. Preqin, a leader of data and intelligence for the alternative assets industry, reported that a total of 9,719 venture capital deals (-13% YoY) worth USD134bn were announced globally. This marks a reversal of the 6-year long upward trend-making 2011 as a record year, with 11,115 deals announced. Despite the dip in the number of deals, the continuing shift from North America to Greater China has not slowed down. In 2016, deals done in Greater China accounted for 21% of all the transactions made, compared to a historical average of 8%. This highlights the lucrative start-up scene within Greater China, which has managed to shift the focus of investors towards the east. In addition, industry players surveyed by KPMG chose two of China s cities as the next Silicon Valley which points to the vast potential that lies within China s technology and start-up sectors in the near future. 6

7 Figure 10: Number of global deals reported Figure 11: Increasing deals in Greater China Source: Preqin Source: Preqin Figure 12: Beijing and Shanghai are seen as the next Silicon Valley Source: KPMG Hotung s competitive advantage. As over 90% of its investments are based in the Greater China region, Hotung is well-plugged into the shifting landscape. The company is participating in investment opportunities there through its existing network and active collaboration with industry players and start-up associations. Its investment team is also ramping up field visits to scout out promising investments. 7

8 Financials Figure 13: FY16 results review Source: Company data Latest results. Hotung reported a net profit of TWD318m (2015: TWD419m) which was above our expectations, primarily due to lower impairment provisions. Balance sheet and cash flow. The group ended FY16 with net cash of TWD2,080 (or SGD95m), and with shareholder s equity of TWD7,298 (or SGD322m). ROE. Due to the drag from a high cash position, Hotung s ROE is in the 5% range. Stripping out the cash drag, we estimate an underlying return of investment of 7-8%. Dividends. In line with its policy of paying out substantially all of its profits, the group declared TWD301m in dividends. This translates to a DPS of SGD0.139, and a 97% payout ratio. Key Risks Susceptible to economic cycles in the Greater China region. More than 90% of Hotung s investments are in the Greater China region, with many of its investee companies in the early stages of growth. A prolonged economic downcycle could cause these companies to be financially stressed and necessitate the taking of impairment losses by Hotung, as witnessed during the 2008 global financial crisis. Intensifying competition may hinder investments. With more venture capitalists and investors turning their attention to the expanding start-up scene in Greater China, the intensifying competition may limit the investment opportunities for promising start-ups. 8

9 Company Background Hotung is one of the pioneers in the venture capital business, with over 30 years of investment and fund management experience. The group operates primarily in Taiwan, China and Silicon Valley and has listed 200 companies on major exchanges around the world. Leveraging on the company s investment expertise accumulated over the years, Hotung invests in innovative and promising businesses globally, across a variety of industries that aim to improve general living standards. Its fund management business manages thirdparty funds as well as the funds generated from its venture capital business. Since 2011, the Taiwanese Government has engaged Hotung to participate in its investment programme which is a testament to its experience and sound investment strategies. Figure 14: Hotung's management team Name Appointment Responsibilities Ms Huang Tsui-Hui Chairman and managing director Ms Huang Tsui-Hui is the chairman and managing director of the company. She is also the chairman and president of Hotung International Company Ltd. Under her leadership, the group s presence in China widened rapidly to meet domestic demand. With her experience in M&As, she previously served as the chairman of the International Business Committee of Taiwan Securities Association. Currently, Ms Huang is the chairman of Taiwan Venture Capital Association. A graduate of National Taiwan University, she earned her MBA from Cornell University, USA. Ms Felicia Hsu Mr Joseph Yu Mr Steven Huang Source: Company data CFO, Head of administration and finance Vice president, head of the Taiwan Investments Department I Vice president head of Taiwan Investments, Department II Prior to joining Hotung, Ms. Hsu was a director at PwC and provided advisory services. She was also the COO/CFO of UBS Taiwan for 15 years, during which she helmed the finance, operations and IT departments to support UBS' various business developments in Taiwan. Ms Hsu has a Bachelor's degree in business from National Taiwan University, and has vast experience in the fields of finance, risk control and advisory services. Mr Joseph Yu currently serves as the vice president of Hotung, and is in charge of the company's investment projects in Taiwan. Prior to this, he was the senior director in Compal Electronics. He has invested in 20 new deals valued at TWD2bn, which have delivered superior returns. Mr Yu holds an MBA degree from National Sun Yat-Sen University, Taiwan and graduated from National Chiao Tung University, Taiwan with a Bachelor's degree in Communication Engineering Mr Steven Huang is the vice president of Hotung and is also in charge of the company's investments in Taiwan. Prior to joining Hotung, he was the vicepresident and head of investments in Global Strategic Investment Management, managing a fund size of TWD4.6bn. A graduate with a Master of Science degree from National Chiao Tung University, Mr Huang has accumulated extensive experience in the investment analysis of technology industries. Besides its experienced management team, Hotung also leverages on the guidance and network of a team of investment advisors that include industrialists and political leaders. Some of its past and present investment advisors include: i. Dr Min-Shyong Lin, founder of Asia Pacific Microsystems; ii. Dr Chih-Kung Lee, current Minister of Economic Affairs of the Republic of China; iii. Mr Lei Jun, founder and CEO of Xiaomi; iv. Mr Xu Xiaoping, founding partner of ZhenFund, one of China s high-profile angel investors. 9

10 SWOT Analysis Has a solid track record of successful IPOs Strong liquidity position Experienced management with talented advisors Unique play on the start-up industry Increasingly competitive outlook Susceptible to major economic weakness Vast potential in the bio-tech, technological and internet industries Government-led initiatives to encourage launch pads for start-ups Increasingly popular start-up scene in Greater China Highly dependent on management s judgement Low visibility on earnings Recommendation Chart Price Close Apr-12 Jul-13 Oct-14 Jan-16 Date Recommendation Target Price Price Source: RHB, Bloomberg Source: RHB, Bloomberg 10

11 Financial Services Diversified Financial Services RHB Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage Investment Research Disclaimers RHB has issued this report for information purposes only. This report is intended for circulation amongst RHB and its affiliates clients generally or such persons as may be deemed eligible by RHB to receive this report and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. 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13 Financial Services Diversified Financial Services Indonesia This report is issued and distributed in Indonesia by PT RHB Securities Indonesia. This research does not constitute an offering document and it should not be construed as an offer of securities in Indonesia. Any securities offered or sold, directly or indirectly, in Indonesia or to any Indonesian citizen or corporation (wherever located) or to any Indonesian resident in a manner which constitutes a public offering under Indonesian laws and regulations must comply with the prevailing Indonesian laws and regulations. Singapore This report is issued and distributed in Singapore by RHB Research Institute Singapore Pte Ltd and it may only be distributed in Singapore to accredited investors, expert investors and institutional investors as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. By virtue of distribution to these categories of investors, RHB Research Institute Singapore Pte Ltd and its representatives are not required to comply with Section 36 of the Financial Advisers Act (Chapter 110) (Section 36 relates to disclosure of RHB Research Institute Singapore Pte Ltd s interest and/or its representative's interest in securities). Recipients of this report in Singapore may contact RHB Research Institute Singapore Pte Ltd in respect of any matter arising from or in connection with the report. Hong Kong This report is issued and distributed in Hong Kong by RHB Securities Hong Kong Limited ( 興業金融證券有限公司 ) (CE No.: ADU220) ( RHBSHK ) which is licensed in Hong Kong by the Securities and Futures Commission for Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities. Any investors wishing to purchase or otherwise deal in the securities covered in this report should contact RHB Securities Hong Kong Limited. United States This report was prepared by RHB and is being distributed solely and directly to major U.S. institutional investors as defined under, and pursuant to, the requirements of Rule 15a-6 under the U.S. Securities and Exchange Act of 1934, as amended (the Exchange Act ). RHB is not registered as a brokerdealer in the United States and does not offer brokerage services to U.S. persons. Any order for the purchase or sale of the securities discussed herein that are listed on Bursa Malaysia Securities Berhad must be placed with and through Auerbach Grayson ( AG ). Any order for the purchase or sale of all other securities discussed herein must be placed with and through such other registered U.S. broker-dealer as appointed by RHB from time to time as required by the Exchange Act Rule 15a-6. This report is confidential and not intended for distribution to, or use by, persons other than the recipient and its employees, agents and advisors, as applicable. Additionally, where research is distributed via Electronic Service Provider, the analysts whose names appear in this report are not registered or qualified as research analysts in the United States and are not associated persons of Auerbach Grayson AG or such other registered U.S. broker-dealer as appointed by RHB from time to time and therefore may not be subject to any applicable restrictions under Financial Industry Regulatory Authority ( FINRA ) rules on communications with a subject company, public appearances and personal trading. Investing in any non-u.s. securities or related financial instruments discussed in this research report may present certain risks. The securities of non-u.s. issuers may not be registered with, or be subject to the regulations of, the U.S. Securities and Exchange Commission. Information on non-u.s. securities or related financial instruments may be limited. Foreign companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in the United States. The financial instruments discussed in this report may not be suitable for all investors. Transactions in foreign markets may be subject to regulations that differ from or offer less protection than those in the United States. OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST Malaysia RHB does not have qualified shareholding (1% or more) in the subject company (ies) covered in this report except for: a) - RHB and/or its subsidiaries are not liquidity providers or market makers for the subject company (ies) covered in this report except for: a) - RHB and/or its subsidiaries have not participated as a syndicate member in share offerings and/or bond issues in securities covered in this report in the last 12 months except for: a) - RHB has not provided investment banking services to the company/companies covered in this report in the last 12 months except for: a) - 13

14 Financial Services Diversified Financial Services Thailand RHB Securities (Thailand) PCL and/or its directors, officers, associates, connected parties and/or employees, may have, or have had, interests and/or commitments in the securities in subject company(ies) mentioned in this report or any securities related thereto. Further, RHB Securities (Thailand) PCL may have, or have had, business relationships with the subject company(ies) mentioned in this report. As a result, investors should exercise their own judgment carefully before making any investment decisions. Indonesia PT RHB Securities Indonesia is not affiliated with the subject company(ies) covered in this report both directly or indirectly as per the definitions of affiliation above. Pursuant to the Capital Market Law (Law Number 8 Year 1995) and the supporting regulations thereof, what constitutes as affiliated parties are as follows: 1. Familial relationship due to marriage or blood up to the second degree, both horizontally or vertically; 2. Affiliation between parties to the employees, Directors or Commissioners of the parties concerned; 3. Affiliation between 2 companies whereby one or more member of the Board of Directors or the Commissioners are the same; 4. Affiliation between the Company and the parties, both directly or indirectly, controlling or being controlled by the Company; 5. Affiliation between 2 companies which are controlled, directly or indirectly, by the same party; or 6. Affiliation between the Company and the main Shareholders. PT RHB Securities Indonesia is not an insider as defined in the Capital Market Law and the information contained in this report is not considered as insider information prohibited by law. Insider means: a. a commissioner, director or employee of an Issuer or Public Company; b. a substantial shareholder of an Issuer or Public Company; c. an individual, who because of his position or profession, or because of a business relationship with an Issuer or Public Company, has access to inside information; and d. an individual who within the last six months was a Person defined in letters a, b or c, above. Singapore RHB Research Institute Singapore Pte Ltd and/or its subsidiaries and/or associated companies do not make a market in any securities covered in this report, except for: (a) - The staff of RHB Research Institute Singapore Pte Ltd and its subsidiaries and/or its associated companies do not serve on any board or trustee positions of any issuer whose securities are covered in this report, except for: (a) - RHB Research Institute Singapore Pte Ltd and/or its subsidiaries and/or its associated companies do not have and have not within the last 12 months had any corporate finance advisory relationship with the issuer of the securities covered in this report or any other relationship (including a shareholding of 1% or more in the securities covered in this report) that may create a potential conflict of interest, except for: (a) - Hong Kong RHBSHK or any of its group companies may have financial interests in in relation to an issuer or a new listing applicant (as the case may be) the securities in respect of which are reviewed in the report, and such interests aggregate to an amount equal to or more than (a) 1% of the subject company s market capitalization (in the case of an issuer as defined under paragraph 16 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (the Code of Conduct ); and/or (b) an amount equal to or more than 1% of the subject company s issued share capital, or issued units, as applicable (in the case of a new listing applicant as defined in the Code of Conduct). Further, the analysts named in this report or their associates may have financial interests in relation to an issuer or a new listing applicant (as the case may be) in the securities which are reviewed in the report. 14

15 Financial Services Diversified Financial Services RHBSHK or any of its group companies may make a market in the securities covered by this report. RHBSHK or any of its group companies may have analysts or their associates, individual(s) employed by or associated with RHBSHK or any of its group companies serving as an officer of the company or any of the companies covered by this report. RHBSHK or any of its group companies may have received compensation or a mandate for investment banking services to the company or any of the companies covered by this report within the past 12 months. Note: The reference to group companies above refers to a group company of RHBSHK that carries on a business in Hong Kong in (a) investment banking; (b) proprietary trading or market making; or (c) agency broking, in relation to securities listed or traded on The Stock Exchange of Hong Kong Limited. Kuala Lumpur Hong Kong Singapore RHB Research Institute Sdn Bhd Level 3A, Tower One, RHB Centre Jalan Tun Razak Kuala Lumpur Malaysia Tel : +(60) Fax : +(60) RHB Securities Hong Kong Ltd. 12 th Floor World-Wide House 19 Des Voeux Road Central, Hong Kong Tel : +(852) Fax : +(852) RHB Research Institute Singapore Pte Ltd. 10 Collyer Quay #09-08 Ocean Financial Centre Singapore Tel : +(65) Fax : +(65) Jakarta Shanghai Bangkok PT RHB Securities Indonesia Wisma Mulia, 20th Floor Jl. Jenderal Gatot Subroto No. 42 Jakarta 12710, Indonesia Tel : +(6221) Fax : +(6221) RHB (China) Investment Advisory Co. Ltd. Suite 4005, CITIC Square 1168 Nanjing West Road Shanghai China Tel : +(8621) Fax : +(8621) RHB Securities (Thailand) PCL 10th Floor, Sathorn Square Office Tower 98, North Sathorn Road, Silom Bangrak, Bangkok Thailand Tel: +(66) Fax : +(66)